09 July 2019

Will resuscitation of Deutsche Bank succeed?

A major overhaul is to lead Deutsche Bank out of its crisis. By 2022, 18,000 jobs are to be cut and the bank will also withdraw from the equities business. CEO Christian Sewing spoke of a 'reboot', saying that the bank would return to its roots. Some commentators praise the strategy, others see little hope of the bank being rescued.

Board of directors needs new blood

According to the Neue Zürcher Zeitung the measures come at the right time:

“At least Deutsche Bank is finally taking a step towards a more promising future under its dynamic CEO Sewing. Focusing on core competencies and increasing profitability and capital efficiency as well as massively reducing costs and cutting jobs is absolutely the right direction to take. ... If the reboot is to come to a successful conclusion, the management will certainly also need a bit of luck. It wouldn't hurt Deutsche Bank's resuscitation, either, to speedily appoint new blood to the board of directors, which has as yet remained untouched.”

The world cannot afford a collapse

La Vanguardia explains why the consolidation of Deutsche Bank has a global dimension:

“Sewing's plan is to focus the activities of Deutsche Bank on families and businesses and on the European markets after the failure of its dreams to expand in the US and Asia - a humble and sensible course. ... It is important that Sewing's plans come to fruition because given its size Deutsche Bank poses a real risk for the German, European, and even the global economy. The international financial system cannot afford this bank to be in crisis because its effects could be as dramatic as, or even worse than, the collapse of Lehmann Brothers in 2008.”

Pride comes before a fall

De Standaard recapitulates how the crisis came about:

“[Deutsche Bank] was once described as the architect of the German economic miracle. In recent years, however, Germany's biggest bank made headlines only because of its scandals. ... In the past ten years, the banking giant has paid at least 16 billion euros in fines. Fines due above all to the hubris and ambition to compete with Wall Street on nothing less than its own territory: as a commercial bank. The former CEO of Deutsche Bank, Josef Ackermann, and especially the head of commercial banking, Anshu Jain, took irresponsible risks for years.”

A takeover target

The taz is not very hopeful:

“Deutsche Bank made losses even when the global economy was booming. But now, a recession is looming, and it is to be feared that the bank will go into a tailspin again. Yet even if there is no new economic crisis: Deutsche Bank has long descended into the death zone because its share price has been floundering at around seven euros. So the bank cannot raise fresh money to finance restructuring or cushion losses. That is why the end is foreseeable: since Deutsche Bank cannot survive on its own in the long term, it will one day be taken over by another bank. The only question is when.”